Netherlands next in line to introduce a “call-in” option for competition regulator?

On Tuesday 18 March, a draft legislative Act was published and opened up for public consultation (see here). Dutch Parliament has proposed that the Dutch Competition Act (DCA) be amended to grant the Netherlands Authority for Consumers and Markets (ACM) its much-desired call-in power. This draft Act will now be submitted to the highest advisory body of the Dutch government after which the responsible minister will express its views. Subsequently, the Parliamentary process will commence. These developments come within days of the ACM opening an investigation into a non-reportable concentration for a potential abuse of dominance (see our previous blog), and fits within a general trend that the ACM is actively calling for more powers.

The ACM has been pushing for a call-in power to review transactions that may raise competition issues in the Netherlands and/or refer them to the European Commission (see recent press release). If enacted, it would mean that parties need to consider not only monetary notification thresholds to determine whether a filing is required, but they should also conduct a (preliminary) substantive overlap analysis to assess the call-in risk. Even when parties determine that their transaction should not raise competition issues, they may still want to inform the ACM to avoid a call-in at an inconvenient time, e.g. after signing or even after closing.

In a letter sent to the Government (see here), the ACM has also called for further changes to the notification system under the DCA and notably the increase in the monetary notification thresholds (suggesting a change from the current EUR 30 million threshold to a EUR 50 million threshold). The ACM receives 130 merger control notifications a year on average, which it would expect to be reduced to approximately 75, if the thresholds were increased to EUR 50 million. That would allow it to focus its resources more on transactions which could raise competition issues.

The draft Act: What will the call-in power look like?

The draft Act proposes to introduce five articles in the DCA (Art. 49a – 49e DCA) which essentially comprise the following:

• The ACM should have the possibility to send requests for information to companies in order to determine whether a concentration could result in a significant impediment to effective competition in the Netherlands;
• Any such request should be made within a period of four weeks from the earlier of: (i) the moment one of the parties has publicly announced their concentration in the Netherlands; (ii) the moment the ACM becomes aware of the concentration; and (iii) six months after signing the transaction documents.
• If the ACM believes that a concentration could result in a significant impediment to effective competition, it can require the parties involved to notify the concentration and the standstill obligation applies; and
• The normal ACM review procedure applies (including a phase 1 and potential phase 2 procedure).

The explanatory memorandum (see here) states that the question when a transaction has been publicly announced, when the ACM becomes aware of it, and when the relevant transaction documents are signed, need to be determined on a case by case basis. It is indicated that no general guidance can be given, as this would be specific to the (legal) facts of each transaction. Based on the experience in other jurisdictions, it is expected that, at least in more sensitive cases, parties would voluntarily “announce” their transactions to the ACM (i.e. via a briefing paper or otherwise).

Explanatory memorandum confirms: Call-in power focused on roll-ups and killer acquisitions

The explanatory memorandum to the draft Act confirms that this call-in power is designed predominantly for the ACM to tackle so-called “roll-up” and killer acquisitions. Roll-ups refer to serial acquisitions, often individually not reportable, whereby a market player in a relatively short period of time makes a series of acquisitions which on their own do not (necessarily) raise any issues (and are frequently unreportable), but which taken as a whole could significantly impede competition. Interestingly, the ACM cleared a roll-up transaction only a few weeks ago. This transaction (Foresco/DWP/Vierhouten) was the first case where the ACM opened an in-depth investigation, focussing on the effects of competition of a roll-up strategy (although in the context of a notifiable transaction). In its press release on the clearance of that deal, the ACM noted that Foresco had become the market leader by making small acquisitions, and that “a series of smaller acquisitions can have the same harmful effects on competitors, buyers, and consumers as a single major acquisition can.”

Killer acquisitions refer to acquisitions made by large (often dominant or major market players) companies of small yet promising and innovative companies to kill any competition before it actually materializes. An example of an alleged killer acquisition (which resulted in lots of media attention and legal cases) is the acquisition of Grail by Illumina. In that case, the European Commission applied a controversial interpretation of Article 22 of the EU Merger Regulation (EUMR) to get national Member States to refer the case to it, without any of the Member States or the Commission having jurisdiction. The case was challenged in the courts and ultimately the Court of Justice ruled that Article 22 EUMR could not be used by authorities that have merger control regimes, but which simply did not have jurisdiction (e.g. because the notification thresholds were not met - see our previous blog on this). As a result of that case, a number of Member States across the EU amended, or are in the process of amending, their national merger control regimes to grant authorities (variants of) call-in powers.

The explanatory memorandum also refers to this development as further substantiation on why the ACM requires this new call-in power.

Competition law is trending

The past weeks’ developments are further evidence of the new policy and priority the ACM and legislators have had with respect to the review of concentrations. Merging parties should carefully consider whether their transaction may have a prima facie impact on competition, and how to best proceed in the Netherlands, even if the merger control notification thresholds are not met.

For further information, or in case of questions, please feel free to contact the authors.